SiriusXM Canada gets close to US ‘parent’

By Chris Forrester

August 22, 2016

SiriusXM Canada is based in Toronto, although its US ‘parent’ only owns 25 per cent of the company. In a somewhat complicated shareholder structure Canadian Satellite Radio Holdings is the official licensee of the business and the Canadian Broadcasting Corp (CBC) also owns a slice, with Slaight Communications also a significant shareholder. Slaight is an old-established radio broadcaster, and today is focused mainly on Internet radio.

Canadian media regulations did not allow the US-based ‘parent’ to control its Canadian ‘subsidiary. Indeed, SiriusXM in the US has long sought to merge itself and the Canadian offshoot into a single unified business. Sirius Satellite Radio Canada and XM Radio Canada merged in Nov 2010, and since 2011 run a near-identical series of channels as the US ‘parent’, although Canadian subscribers have some unique services.

That unification is now closer, although not without generating strong Canadian controversy from 6 minority shareholders who own 21 per cent of the company’s equity (and excluding CBC). They argue that the Canadian business is now a great “cash machine”, and generating some C$45.5 million of net income in the September 2015-May 2016 trading period.

One firm of advisors, Institutional Shareholder Services Inc came out with a negative recommendation on the deal. Canada’s CBS public broadcaster is in favour of the deal.

Glass Lewis & Co, a leading independent proxy advisory firm also provided advice to all concerned, and follows other studies undertaken by Ernst & Young, and the broadcaster’s financial advisor, National Bank Financial Inc. Glass Lewis, on August 19th, in a report formally advised shareholders to accept the proposed transaction. Glass Lewis stated that the transaction: “represents the most logical and attractive option for minority shareholders.” Additionally, Glass Lewis advised that: “the transaction is likely to lead to greater clarity, enhanced performance and superior value for shareholders… we believe the proposed transaction is in the best interests of shareholders.”

“We are very pleased that the Glass Lewis report reaffirms our position that the proposed transaction maximises value for our shareholders,” said Mark Redmond, President/CEO of SiriusXM Canada.

“Among other things, the report highlights that the transaction offers a premium price, certainty of value and/or the option to remain invested in the North American satellite radio market opportunity, while also removing key business and financial risks. We remain confident that the arrangement is in the best interest of shareholders and subscribers, and continue to recommend that shareholders vote in favour of the transaction.”

On August 23rd SiriusXM Canada issued a Q&A document to shareholders to answer some key questions ahead of an August 26th vote on the plan, and a subsequent meeting is scheduled for August 30th in Toronto.